U.S. 90 Percent Silver Coins: Best Silver Value
September 3, 2020
By Patrick A. Heller
A common question we hear from people contemplating a first-time purchase of physical gold and silver, once they realize there are multiple coin and ingot options, is which forms we would recommend.
There are a number of factors that can influence what would be the best answer for each buyer’s circumstances. Among those factors is: 1) whether the item is legal tender, 2) pure metal or alloy, 3) exact even troy or gram weights (or not), 4) coins versus ingots, 5) liquidity, 6) divisibility, 7) lower premium to metal value, 8) country of origin, 9) ease of storage, and 10) government regulation considerations.
For gold issues, there is no single product that fits the optimum parameters of every purchaser, so the “best” choice could be any of a number of products.
Among silver options, for most people, I judge that the U.S. 90 percent silver coins, the dimes, quarters, and half dollars struck for circulation circa 1892-1964 represent the best value. They are often referred to as “junk silver.” Here’s why:
- Legal tender status: U.S. 90 percent silver coins are legal tender. This is especially important if transporting silver across international borders where coins are exempt from import duties almost everywhere. Ingots, on the other hand, are almost always subject to import duties.
- Alloyed coins: Pure silver and gold are not as durable for use in commerce as alloyed products. The U.S. 90 percent silver coins also contain 10 percent copper content to give them durability. Those who are purchasing physical silver for potential barter use should avoid the less durable (though not extremely less) pure products such as ingots, silver Eagles, Canada Silver Maple Leafs, and the like.
- Coin form: U.S. 90 percent silver coins are coins struck by the U.S. Mint, which have unquestioned quality control during production. Although silver coins and ingots handled by primary distributors and established coin dealers have almost no problems with selling counterfeit products, there is a growing problem of products purchased online or in non-standard venues such as flea markets that turn out to be counterfeit. However, counterfeiters don’t make counterfeit bullion-priced U.S. 90 percent silver coins. Instead, they make 1) large bars where the outer surfaces may be high purity silver and the interior might be made of other substances that result in the gross weight being close to accurate, and 2) silver coins and rounds of a larger size than the sizes of U.S. 90 percent silver dimes, quarters, and half dollars.
- Maximum liquidity: Around the world, U.S. 90 percent silver coins is one of the most widely traded forms of bullion-priced silver. There are massive quantities of these coins available, which means they are easy to buy and sell in any quantities. They are among the most liquid of any form of bullion-priced silver. Another advantage is that almost all Americans aged 60 and over are familiar with these coins because of their experience receiving and spending them in circulation.
- Maximum divisibility: Among currently manufactured coins and ingots, there are few practical options below 1 troy-ounce silver content. The average circulated U.S. 90 percent silver coins contain 0.715 of an ounce of silver per dollar of face value (715 troy ounces per $1,000 face value). That means that one 90 percent silver dime contains about 1/14 of an ounce of silver. For use in commerce, a 90 percent silver dime could purchase a loaf of bread or a 90 percent silver quarter could purchase more than a gallon of gasoline, with little need to make change. Carrying around a one-ounce coin or ingot today would be like carrying around a $30 bill.
- Very low premium: Here is perhaps the strongest advantage of U.S. 90 percent silver coins—low premium above silver value. Today, there are multiple retailers selling $1,000 face value bags and even at least one selling $100 face value quantities for less than $2 per ounce of silver content above the ask silver spot price (although there are several major retailers still charging a premium of more than $3 per ounce above the ask spot price). There are few bullion silver products available at a lower cost per ounce—1,000-ounce ingots, U.S. 40 percent silver half dollars 1965-1969, U.S. 35 percent silver nickels 1942-1945, and Canada 80 percent and 50 percent silver coins. The 1,000-ounce ingots are the bars manufactured for storage in COMEX and other commodity warehouses. Once removed from these vaults, these bars (which weight about 68.5 pounds) almost always need to be sent to a refinery in order to sell them. The lower premium other coins I just listed have a wider percentage buy/sell spread, require greater storage space for the same number of ounces of silver (because of the greater non-silver content), and are difficult to locate in quantity.
- American-made: For American buyers, some are more comfortable with products created in the U.S. Another advantage over ingots and non-U.S. coins is that each piece bears “United States of America.”
- Easy to store: U.S. 90 percent silver coins might take up about 11 percent more storage space for the same ounces of silver as pure coins and ingots, which is a slight disadvantage. However, because of their divisibility, it is easier to fit them into safe deposit boxes than 10- or 100- ounce ingots or the 5-ounce American The Beautiful quarters. Because of their divisibility, it is also easier to break quantities into smaller units to store in multiple locations.
- Not even weights: Many owners of silver like forms that are manufactured with even troy ounce or metric weights, especially those that state their silver content on each piece. This simplifies value calculations. However, is it worth paying an extra $1 to $5 per troy ounce of silver content simply to make it one step faster to calculate value? There is another consideration when purchasing U.S. 90 percent silver coins is that these coins exhibit varying degrees of wear. When newly struck these coins contain about 723.38 ounces of silver per $1,000 of face value. As the coins circulate, they lose a small amount of silver content. The bullion industry standard is that the average $1,000 face-value bag of circulated U.S. 90 percent silver coins contains 715 ounces, about 1.16 percent lower than uncirculated coins. This means that there will be some slick coins as well as other coins that may even be uncirculated.
One warning when purchasing U.S. 90 percent silver coins is to ask the weight of the coins you are receiving. At the company where I work, for example, we package U.S. 90 percent silver coins in sealed canvas bags of $500 face value and mark the gross weight of such bags right on the canvas. To ensure that our customers get satisfactory content, we only sell these bags that weight at least 27.25 pounds (which includes the weight of the canvas bag and the seal) although almost all bags are not even close to this minimum. If someone is stuck with a group of U.S. 90 percent silver coins containing too many slick coins (as we saw in the 1979-1980 and 2011 silver booms), sellers risk being paid a lower price when they want to liquidate. Back in the previous market peaks, not only did the count of face value have to be accurate, but the gross weight of the coins was also checked.
- Alloyed coins: There is one scenario where alloyed coins could be worth less than pure coins and ingots. That is in a runaway boom market where almost every form of silver is being shipped to refiners to melt down. In such markets, pure forms could be worth an extra 1-2 percent over U.S. 90 percent silver coins. But, since today you can purchase U.S. 90 percent silver coins for 4-10 percent less per ounce of silver content than pure forms, those who own the U.S. 90 percent silver coins would still be better off.
- Onerous government regulations: U.S. 90 percent silver coins have some potential government regulations that apply where they don’t apply on some other forms of bullion silver. 1) For those who want to own bullion silver in a self-directed Precious Metals Individual Retirement Account, the only options that may be bought for such accounts are .999 fine silver ingots or coins that have a purity of .999. Lesser purity coins and ingots, including U.S. 90 percent silver coins, cannot be held in such accounts. 2) Non-corporate sellers of at least 1,000 ounces of .999 fine silver ingots or at least $1,000 face value of U.S. 90 percent silver coins are required to supply their tax number and will receive Form 1099-B early the next year, with a copy sent to the Internal Revenue Service. The IRS will then expect to see a gain or loss from such sales reported on income tax forms. While tax agencies expect such gains and losses to be reported on income tax forms regardless of whether a Form 1099-B is created, some people don’t like the loss of privacy when Form 1099-B is required. However, liquidating smaller quantities of .999 silver ingots and U.S. 90 percent silver coins in unrelated transactions avoids the need for the business to prepare Form 1099-B.
There is another consideration, and that relates to personal privacy. Almost all 100-ounce and larger silver ingots have a serial number. Some smaller ingots also have them. That protects owners as, theoretically, it would be possible to verify the purity of the ingot from the manufacturers’ production records. Also, for items stored in a vault, having serial numbers of the stored ingots offers some protection to the owner (possible with registered or segregated storage but not with unallocated storage). Having serial numbers of products can also help those who suffer a theft possibly verify the recovery of such items. However, for those who want maximum anonymity and privacy, they may want to own bullion silver that does not have serial numbers. In this instance, U.S. 90 percent silver coins.
Finally, there have been times when owners of U.S. 90 percent silver coins have been able to arbitrage their holdings to increase the ounces of silver they own without paying out any more cash. Because the last US. 90 percent silver coins that were struck for circulation are dated 1964, the available quantity is finite. No more are being struck. In markets of strong demand for bullion silver such as in 1982 and late 2008, the retail premium of U.S. 90 percent silver coins can rise much higher than that of coins and ingots in current production. When this happens, I have helped customers swap their U.S. 90 percent silver coins into ingots to end up with a greater number of total ounces of silver. Today, such a swap would be an income-taxable event, so you should consult your tax adviser if this arbitrage opportunity again occurs.
As you can see, even with U.S. 90 percent silver coins and its significant advantages in low price and other factors, there could be considerations applicable to some buyers that could lead them to acquire alternate bullion-priced silver. Still, in my judgment, for almost all American buyers, U.S. 90 percent silver coins represent the best value in bullion silver today.